Moscow Exchange IPO doubly oversubscribed

The Moscow Exchange has seen the growth of 2.29 percent since its IPO this week. Source: RIA Novosti / Alexey Kudenko

Secondary trading in Moscow Exchange shares started on the MICEX in mid-February. The issuer managed to find more investors at the 11th hour and lifted the IPO price from the lower range. Still, a limited number of big investors is unlikely to ensure high trading volumes for the stock over the next few months.

The Moscow Exchange
has seen the growth of 2.29 percent since its IPO this week. Experts view the trend
as positive. The recent listing was the biggest in the history of the Moscow
Stock Exchange, according to them.

The book for the
Moscow Exchange IPO was closed at 7 p.m. on Feb.14. It was oversubscribed
twice-over, reaching $1 billion instead of the target of $500 million, two
sources close to IPO underwriters told Vedomosti.

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On the basis of a
price of 57 rubles ($2) per share, investors valued Russia’s main trading venue at $4.5
billion. The underwriting banks had valued the exchange at between $4.2 billion
and $6 billion. “The result surprised us on the upside — both the placement
price and the size of the book,” a manager of a fund that bid for the stock
said.

The quality of the
book also proved to be quite high, a person close to the underwriters said:
“There were no anchor investors with $500 million each; big American and
European funds with well-known names participated.”

Large bids (around
$250 million) came from several funds attracted by the Russian Direct
Investment Fund (RDIF), according to an employee of an underwriting investment
bank; the employee added that these included CIC, Blackrock, and Oppenheimer.
CIC was originally planning a $70–100 million bid, but ended up bidding $100
million, an executive of a Russian asset management company said.

“Demand was so
strong that it forced the RDIF to lower their bid from $100 million to $80
million; but, in general, it may be said that their participation provided
substantial support for the placement,” the source told Vedomosti.

BCS had received
several dozen bids for several hundred dollars by the evening of Feb. 14, the
head of BCS brokerage’s online futures trading, Pavel Sorokovoy, told Vedomosti.
Otkrytie received some 130 bids for 10 million rubles ($332,000), the
brokerage’s managing director Yuri Mintsev said. Meanwhile, according to a
Finam spokesperson, their brokerage company had 117 bids for 11.8 million
rubles ($392,000) at 7:45 p.m. Moscow
time, on Feb. 14.

The offering was
made at the exchange’s own venue and was limited to Moscow only. Trading in Moscow Exchange
shares started at the Moscow Exchange at 12:05 p.m. Moscow time, on Feb.
14.

The exchange is,
of course, overvalued even at the lower band of its price range, the portfolio
manager of Swedbank Robur Rysslandsfond, Elena Loven, told Vedomosti.
Nonetheless, her fund also took part in the IPO. “Any exchange’s business is
valued highly because of strong margins and high growth rates,” said Loven.
“There is a dearth of big, fast-growing businesses in Russia, so we
have to work with what’s available.”